Bull Flags

Bull Flag pattern

The bull flag pattern is found within an uptrend in a stock. Flags are named after the resemblance of the chart pattern to a flag flying from a flagpole.

A bull flag occurs in a rising market within an upward trend and is the flag that most accurately reflects the description. The flag is characterised by a series of lower highs and lows that do no break out above the first high at the flagpole. A true flag should retrace slightly against the trend.

The bull flag is a continuation pattern and only slightly retraces the price advance that preceded it.

The flag establishes a number of possible buy points depending on how aggressive the trader wishes to be. These may be when the price breaks above the upper trend line of the flag or when the price breaks above the highest high of the flag pattern.

The bull flag should be read in conjunction with the volume. The best flags are clearly visible with strong upward price thrusts with good volume to form the flagpole followed by the retracement with a slight downward movement with volume decreasing indicating a lack of conviction by the market the the price is going in the right direction. It should be possible to draw parallel trend lines on the top and bottom limits of the flag pattern giving the appearance of the flag.